Professional Documents
Culture Documents
PowerPoint Presentation by
Gail B. Wright
Professor Emeritus of Accounting
Bryant University
MANAGEMENT
ACCOUNTING
8th EDITION
BY
LEARNING OBJECTIVES
1. Discuss the importance of unit costs.
2. Describe functional-based costing
approaches.
3. Tell why functional-based costing
approaches may produce distorted costs.
Continued
2
LEARNING OBJECTIVES
4. Explain how an activity-based costing
system works for product costing.
5. Explain how the number of activity rates
can be reduced.
LO 1
LO 1
LO 1
LO 1
LO 1
UNIT COSTS
Affect
Bids submitted for special products
Development, introduction of new products
Decisions to
Make or buy a product or service
Accept or reject a special order
Keep or drop a product or service
LO 1
LO 2
PLANTWIDE RATE:
An Example
Budgeted overhead
$360,000
$360,000
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LO 2
Underapplied (overapplied)
(overapplied)
overhead is a variance that is
added
addedto
to (subtracted from) cost
of goods sold.
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LO 3
12
LO 3
CREATING DISTORTIONS
When a unit-level approach is used to
assign non-unit-level costs
(overhead), cost information can be
distorted.
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LO 4
14
LO 4
15
LO 4
16
LO 4
CLASSIFICATION OF ACTIVITIES
Product costs can be assigned at a)
unit level, 2) batch level, 3) product
level or 4) facility level.
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LO 5
18
LO 5
COMPARING SYSTEMS
Functional-based system
Overhead uses only unit-based activity drivers or
Splits overhead into fixed and variable and
allocates overhead based on the appropriate unitlevel rate
Activity-based system
Improves product costing by
Looking at cause & effect
Recognizing that some fixed overhead varies in
proportion to changes other than production volume
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CHAPTER 4
THE END
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